Fox's Early Pacts in Upfront Raise Question: Will Other Nets Get Their Price?

ABC, CW Start to Do Business; CBS and NBC Start Talks

Will the TV networks be able to get the full price increases they've been seeking in this year's "upfront"? A maneuver by Fox has some players wondering if rival TV outlets will be forced to settle for less than they hoped just a few weeks ago.

There's a lot of wind at TV networks' backs in this year's upfront marketplace, when the nation's TV outlets sell the majority of their ad inventory for the fall. Fox has broken from the pack, starting to sell ad inventory late last week at prices per thousand viewers -- a measure also known as a CPM that is a common measure in these types of negotiations -- that run between 9.5% and 12% above what the network sought for last season. Most of those deals are priced with CPM increases between 10% and 11%, according to people familiar with the situation. In last year's talks, by comparison, Fox was able to secure CPM increases in the high-single-digit percentage range.

Others have also begun doing business. Walt Disney's ABC has just begun moving in its upfront process, according to several media buyers, securing some small deals with CPM increases around 10%. ABC declined to comment. And the CW, jointly owned by CBS and Time Warner , has also begun moving along, largely due to demand from movie studios, these media buyers said. Cable networks continue to register budgets, according to one person familiar with the marketplace, with different networks seeking CPM increases ranging anywhere from 8% to 14%.

Separately, CBS and NBC are actively engaged in talks with clients, according to people familiar with the situation.

Fox's ability to score double-digit price increases -- a cost hike from which advertisers generally shy away -- is indicative of the strength the TV networks have going into this year's haggling. With audiences dwindling, advertisers require more commercial time to reach the same number of consumers as it did last year, meaning the cost of reaching 1,000 viewers is going up. Because the cost of buying "as needed" commercial time outside the upfront -- also known as "scatter" -- has been high all season, many marketers are likely interested in locking down a price now, fearing costs could go up in the fall as the economy continues to improve.

But Fox's maneuvering may have thrown a wrench into the process. Because Fox has the highest number of viewers between ages 18 and 49 -- an advertiser's most-coveted demographic -- it has the chance to set the tone of this season's upfront. What's more, Fox only has two hours of prime time to sell most nights and is launching the highly anticipated "X Factor" this fall, both of which only serve to increase demand. Fox, which typically moves early in the upfront, is seeing brisk sales, according to media buyers, but is not close to completion.

Yet executives on both sides of the table suggested Fox could have secured steeper price hikes. The network appears to be following a strategy it established last year: Take smaller price increases in favor of securing a larger volume of overall dollars before rival networks can move along further in their own negotiations.

That move can give other networks financial indigestion of a sort. Advertisers are likely to use Fox's CPM increases as a benchmark in talks with rivals.

Even so, the tactic may not be of much use, according to ad buyers and other people familiar with the tone of this year's negotiations.

CBS is likely to ignore Fox's maneuvers and make the case that its schedule is more reliable and has less change than those of others, ad buyers suggested. CBS is likely to try to match or surpass Fox's CPM increases, these buyers said.

NBC is taking a harder-than-usual stance in this year's talks, according to ad buyers. The network, which has suffered from lackluster prime-time offerings in recent seasons, typically commands in the lower range of CPM increases.

NBC will try to push back this year, ad buyers said. NBC likely to push for CPMs in line with those secured by rivals, rather than pacing below the rest of the market, ad buyers suggested. NBC's pitch talks of Comcast Corp. making new investment in programming, and describes a turnaround effort that should not be discounted by advertisers. Some buyers did not know whether the network would be able to hold strong in talks, or feel the need to move as other TV networks began to write more business.

Several ad buyers felt the upfront could be wrapped over the course of the next few weeks. Last year's haggling finished in early June, with total ad commitments for the five broadcast networks' prime-time inventory totaling between $8.1 billion and $8.7 billion, according to Advertising Age estimates, eking out a small gain over 2009's estimated $7.8 billion to $8.1 billion.

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Brian Steinberg

Brian covers the big broadcast television networks and also looks at changes in the world of TV advertising. He particularly enjoys stories that have a pop-culture element to them, but that doesn't preclude him from being open to all topics. Use email or phone to contact.